Broadcom Gains the Most Since July After Rosy Forecast: Los Angeles Mover

By Ian King -
Feb 1, 2012

Broadcom Corp. (BRCM), a maker of chips that
help mobile devices connect to the Internet, rose the most in
six months after forecasting first-quarter sales that may exceed
analysts’ estimates.

Broadcom, based in Irvine, California, advanced 8.1 percent
to $37.13 at 12:09 p.m. in New York after rising as much as 8.5
percent for the biggest intraday gain since July 26. The stock
fell 33 percent in 2011.

The company is benefiting from demand for radio chips that
help Apple Inc. (AAPL)’s smartphones and tablets connect over Wi-Fi and
Bluetooth signals. Apple’s phone sales more than doubled to 37
million in the fourth quarter. Broadcom’s forecast allayed
concerns that weaker mobile-phone shipments in the first quarter
would drag down chip orders, said Daniel Amir, an analyst at
Lazard Capital Markets in San Francisco.

“This is definitely a positive surprise,” said Amir, who
recommends buying the shares. “It’s possible that their share
gains are leading to them outgrowing the industry.”

First-quarter revenue will be $1.7 billion to $1.8 billion,
Broadcom said yesterday in a statement. Analysts on average had
estimated $1.73 billion, data compiled by Bloomberg showed.
In another statement yesterday, Broadcom said it increased its
quarterly dividend by 11 percent to 10 cents a share.

Fourth-quarter net income fell to $254 million, or 45 cents
a share, from $266 million, or 47 cents, a year earlier, the
company said. Sales declined 6.4 percent to $1.82 billion.
Excluding certain costs, profit was 68 cents.

Broadcom was estimated to have fourth-quarter profit before
costs of 65 cents a share on sales of $1.8 billion, the average
analysts’ estimates in a Bloomberg survey.

3-G Chips

While demand for older, so-called 2G mobile-phone chips is
declining, the company expects to gain market share with 3G
wireless products and combination chips that only Broadcom can
make, Chief Executive Officer Scott McGregor said on a call with
analysts.

“We know of no other competitor who can say they’re best
in class for all of these components,” he said. “There’s an
opportunity for us to increase share in combo chips this year.”

Apple accounted for 16 percent of Broadcom’s sales in 2011,
the estimate of Uche Orji, an analyst at UBS AG in New York.
Apple uses a Broadcom chip to supply Wi-Fi, Bluetooth and other
radio connections.

Product gross margin, the percentage of sales remaining
after deducting the cost of production, will be “roughly flat”
in the current quarter compared with the 49.3 percent reported
in the fourth quarter, the company said.